| dc.description.abstract | Venture Capital and Private Equity (VC&PE), an alternative financing channel for
Small and Medium-sized Enterprises (SMEs)1, has been developed in North America and
EUROPE in the mid-20th century but has not appeared in Vietnam till 2003. Moreover,
Venture Capital‘s (VC‘s) development in the US is synonymous with the highly successful
Silicon Valley, home to thousands of small startups and is the leading hub for high-tech
innovation and development. Vietnam has one of the fastest growing economies especially in
the Information Technology (IT) sector but, unlike Silicon Valley, we have an immature
supporting VC ecosystem; most of IT firms in Vietnam are small and lack of capital. They
cannot borrow money from banks because of limited collateral. They also cannot get
financing from angel investors because this source is very limited. VC&PE would be a
suitable alternative financing solution for Vietnam IT firms to fund their projects and
business; but there are many barriers that hinder their access.
Previous research have shown that there are barriers that hinder SMEs‘ access to
VC&PE financing in Australia. However, because VC&PE are key to the success in North
America‘s Silicon Valley and the European IT industry, there is a growing interest to identify
barriers in Vietnam and recommending solutions to overcome these barriers.
This exploratory research was conducted through the interviewing of 6 VC&PE funds
and 12 Vietnam IT firm owners in order to identify barriers from their experiences in practice.
The research confirmed the existing of finance-, knowledge-, and empathy-gap from
previous research in Australia. We have also indentified additional barrier, which we will call
Vietnam specific gap, in Vietnam. Low competitiveness of IT product, immature of IT
market, and lack of reliable source of information are factors contribute to the Vietnam
specific gap when VC&PE investors first look for investment opportunities into Vietnam IT
1 This research not only identify barrier(s) in VC&PE funding to Vietnam IT SMEs but also to large IT
corporation
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industry. On the other side, immature of Vietnam VC&PE industry has a very limited
financing opportunities for Vietnam‗s entrepreneurs, especially Vietnam IT firms. But
Vietnam IT firm owners are losing alternative financing opportunities from VC&PE funds
because they are too focus on traditional financing method. Unstable tax policies, immature
of legal system, immature IPO market, information transparency problem, and a young
educational system are also main factors contribute to the larger of Vietnam specific gap.
Based on: (i) suggestions of previous research in other regions, (ii) recommendations
from interviewees, and (iii) the findings from this research have suggested that Vietnam IT
firms should professionalizing their management activities, preparing a feasible long-term
plan and improving their knowledge about VC&PE funding terms when they approach
financing from VC&PE funds. This research also proposed VC&PE funds to improve their
understating about Vietnam‘s Information and Communications Technology (ICT) sector,
their knowledge about Vietnam‘s IT business and changing their investment policies to adapt
Vietnam IT market. Vietnamese government could help improve VC&PE funding to Vietnam
IT sector through improving legal system, changing tax policies, and supporting IT industry
to grow faster.
Keywords: Information Technology, Venture Capital, Private Equity, Barriers | en_US |
